Court stays HZL stake sale

Asks government to amend law for disinvestment in Hindustan Zinc

Observing that divestment of 29.5 per cent shares of Hindustan Zinc Ltd cannot be done without sanction of Parliam-ent, the Supreme Court on Tuesday restrained the Centre from offloading the shares in favour of the UK-based Vedanta group dealing with metals and minerals.

A bench of Chief Justice T S Thakur and Justices A K Sikri and R Banumathi passed this restraint order on a petition from the National Confederation of Officers Association, contending that the government had violated the law in 2002 for divesting its shares in HZL, which was set up through an act of Parlia-ment. The company’s shares could therefore be sold only after amending the relevant law.

Attorney General Mukul Rohatgi submitted that since the character of the company had already been changed in 2002, Parliament’s approval was not required for divesting the remaining holding. He argued that the Central Government did not agree with an earlier apex court ruling in the Hindustan Petroleum Corporation Limited (HPCL) case that no disinvestment can be permitted in the government companies without Parliamentary nod.

“There was no challenge at that time (disinvestment). The correctness of the judgment (HPCL) is doubted by us (government) Whatever has happened in 2002 has happened. It is not a government company, any more”, Mr. Rohatgi asserted.

The CJI observed that the 2002 violation was not a licence for the government for committing another mistake. “What is the compulsion for divesting the shares in a hurry You can’t do it without amending the law.”

Arguing for the petitioner, counsel Prashant Bhushan contended that the shares worth lakhs of crores were sought to be given away in haste. He said that the Hindustan Zinc Company when it was originally divested of the 26 per cent stakes received only Rs 300 cr at the rate of Rs 40 per share, whereas, its minimum value was pegged at Rs 119 per share thus causing several crores of rupees loss to the exchequer. He said the C&AG in an earlier report had indicted the Government for the disinvestment process.

Senior counsel Aryama Sundaram, for Vedanta said that the costing would be done in a transparent manner. “Let the government also make some profit” from HZC, the CJI remarked and clarified that Vedanta could nevertheless go ahead with further investments in the erstwhile state-owned company as the restraint order would not cover this aspect. The Bench listed the matter for further hearing after four weeks.